Oil prices rose near $90 a barrel as investors bet a new U.S. jobs package unveiled by President Barack Obama will help boost demand for crude. The dollar weakened against the yen and the euro.

Japan’s Nikkei 225 index fell 0.4 per cent to 8,759.06 after spending part of the day in positive territory. The government reported that the country’s economy contracted in the April-June quarter at an annual rate of 2.1 per cent, worse than the initial estimate of 1.3 per cent.

But the result was not unexpected, given the scope of the damage done by the March earthquake and tsunami that destroyed many of northeastern Japan’s factories and businesses. Economists expect the world’s No. 3 economy to pick up in the months ahead.

South Korea’s Kospi fell 1.2 per cent at 1,822.79. Australia’s S&P/ASX 200 rose 0.7 per cent to 4,216.50 and Hong Kong’s Hang Seng was 0.2 per cent higher at 19,957.18.

Mainland China’s Shanghai Composite Index rose 0.1 per cent to 2,502.26 after the government said increases in consumer prices had moderated in August. Prices rose 6.2 per cent from a year earlier, easing from a 37-month high of 6.5 per cent in July.

That raised the possibility of China easing its tight monetary policies — or at least putting further interest rate hikes on hold — and helping it to ward off the impact of a slowing global economy.

“It was a mild relief to markets,” said Ric Spooner, chief market analyst at CMC Markets in Sydney. “Particularly if pork and food prices continue to come off, that puts the Chinese government and monetary authorities in a position to do what is being done around the rest of the world — to stop tightening and take it as a ‘steady as it goes’ approach.”

Another good sign, according to Spooner: American consumer borrowing rose nearly $12 billion in July as demand for school and auto loans fueled the increase. Borrowing is usually a sign of confidence in the economy because consumers tend to take on more debt when they feel wealthier.

On Wall Street, stocks closed sharply lower Thursday after Bernanke in a speech closely watched by investors said the Fed will consider a range of steps at its Sept. 20-21 meeting.

The Dow Jones industrial average lost 1 per cent to 11,295.81. The Standard & Poor’s 500 index fell 1.1 per cent to 1,185.90. The Nasdaq composite shed 0.8 per cent to 2,529.14. Each index had posted gains earlier in the day.

Also Thursday, President Barack Obama, looking to jolt the U.S. economy back to health, proposed a $447 billion plan for creating jobs in a nationally televised speech before Congress late Thursday. Obama will likely have a hard time getting much of his plan through Congress since Republicans control the House of Representatives.

Concerns about the U.S. economy have pushed stocks lower each month since April. Many traders now say the stock market is factoring in the assumption that the economy is in a recession, meaning limited job growth and weaker corporate profits.

In energy trading, benchmark oil for October delivery was up 14 cents to $89.19 in electronic trading on the New York Mercantile Exchange. Crude fell 29 cents to finish at $89.05 on Thursday.

In London, Brent crude for October delivery was down 20 cents at $114.35 on the ICE Futures exchange.

In currencies, the dollar slipped to 77.45 yen from 77.54 yen late Thursday in New York. The euro was higher at $1.3906 from $1.3876.

Credit Agricole CIB said that the debt crisis swirling around smaller European countries was finally being felt by the euro, which had been showing persistent strength against the greenback.

The euro “broke below the psychologically important 1.40 level as peripheral tensions are finally beginning to take their toll on the currency,” the bank said in a report.